Leonid “Leo” Hurwicz (born August 21, 1917) is an American economist and mathematician who is known to fifty years of students as a professor and to his peers as the researcher who originated incentive compatibility and mechanism design which are used in economics, social science and political science to achieve desired outcomes. Interactions of individuals and institutions, markets and trade are analyzed and understood today using the models he developed. A man of commanding intellect, Hurwicz is described as calm and humble. He loves to teach and to connect with people and is admired for thinking of others as equals.
Hurwicz is Regents’ Professor of Economics (Emeritus) at the University of Minnesota. He is among the first economists to recognize the value of game theory and is a pioneer in its application. Hurwicz shared the 2007 Nobel Prize in Economics, as it is commonly called, with Eric Maskin and Roger Myerson for their work on mechanism design.
Hurwicz was born in Moscow, Russia, to a Jewish family a few months before the October Revolution. The family was Polish and had lived in Congress Kingdom (the part of Poland then within the Russian Empire) but had been displaced by World War I. Soon after Leonid's birth, the family returned to Warsaw, Poland. Hurwicz and his family experienced persecution by both the Bolsheviks and Nazism; he again became a refugee when Hitler invaded Poland in 1939. His parents and brother fled Warsaw, only to be arrested and sent to Soviet labor camps. Hurwicz was forced to move to Switzerland, to Portugal, and finally in 1940 he emigrated to the United States. His family eventually joined him there.
Hurwicz hired Evelyn Jensen (born October 31, 1921), who grew up on a Wisconsin farm and was at the time an undergraduate in economics at the University of Chicago, as his teaching assistant during the 1940s. They married in 1944 and later lived on the Mississippi River parkway in Minneapolis, Minnesota. They have four children, Sarah, Michael, Ruth and Maxim. Hurwicz has some health problems so he is living in a nursing home. As of 19 October 2007, he is probably not planning to attend the Nobel Prize ceremonies in Sweden.
He has interest in linguistics, archaelogy, biochemistry and music. His activities outside the field of economics have included research in meteorology and membership in the NSF Commission on Weather Modification. When Eugene McCarthy ran for president of the U.S., Hurwicz served in 1968 as a Minnesota delegate to the Democratic Party Convention and a member of the Democratic Party Platform Committee.
Encouraged by his father to study law, in 1938 Hurwicz received his LL.M. degree from Warsaw University, where he discovered his future vocation in economics class. He then studied at the London School of Economics with Nicholas Kaldor and Friedrich Hayek. In 1939 he moved to Geneva where he studied at the Graduate Institute of International Studies and attended the seminar of Ludwig von Mises. After moving to the United States he continued his studies at Harvard University and the University of Chicago. Hurwicz has no degree in economics. In 2007 he said, "Whatever economics I learned I learned by listening and learning."
In 1941 Hurwicz was a research assistant to Paul Samuelson at the Massachusetts Institute of Technology and to Oskar Lange at the University of Chicago. At Illinois Institute of Technology during the war, Hurwicz taught electronics to the U.S. Army Signal Corps. From 1942 to 1944, at the University of Chicago, he was a member of the faculty of the Institute of Meteorology and taught statistics in the Department of Economics. About 1942 his advisors were Jacob Marschak and Tjalling Koopmans at the Cowles Commission for Research in Economics at the University of Chicago, now the Cowles Foundation at Yale University.
Hurwicz received a Guggenheim Fellowship in 1945–1946. In 1946, he became an associate professor of economics at Iowa State College. From January 1942 until June 1946, he was a research associate for the Cowles Commission. Joining full time in October 1950 until January 1951, he was a visiting professor, assuming Koopman's classes in the Department of Economics, and led the commission's research on theory of resource allocation. About this time, he was also a research professor of economics and mathematical statistics at the University of Illinois, through the University of Chicago a consultant to the RAND Corporation, and a consultant to the U.S. Bureau of the Budget. Hurwicz continued to be a consultant to the Cowles Commission until about 1961.
Hurwicz was recruited by Walter Heller to the University of Minnesota in 1951, where he became a professor of economics and mathematics in the School of Business Administration. In 1961 he became chairman of the School of Statistics, Regents Professor of Economics in 1969, and Curtis L. Carlson Professor of Economics in 1989.
In 1955 and again in 1958 Hurwicz was a visiting professor, and a fellow on the second visit, at Stanford University and there in 1959 published “Optimality and Informational Efficiency in Resource Allocation Processes” on mechanism design.
Hurwicz traveled to teach at a large number of schools primarily in the U.S. and Asia. He taught at Bangalore University in 1965 and during the 1980s at Tokyo University, People's University now known as Renmin University of China and the University of Indonesia. In the U.S. he was a visiting professor at Harvard in 1969 and the University of California, Berkeley in 1976 and Northwestern University twice, in 1988 and 1989, and the University of California, Santa Barbara in 1998, the California Institute of Technology in 1999, and the University of Michigan in 2002. He was a visiting Distinguished Professor at the University of Illinois in 2001.
Hurwicz' interests include mathematical economics and modelling, and the theory of the firm. His published works in these fields date back to 1944. He is internationally renowned for his pioneering research on economic theory, particularly in the areas of mechanism and institutional design and mathematical economics. In the 1950s, he worked with Kenneth Arrow on non-linear programming; in 1972 Arrow became the youngest person to receive the Nobel Economics prize. Hurwicz was the graduate advisor to Daniel McFadden, who received the prize in 2000.
Earlier economists often avoided analytic modelling of economic institutions. Hurwicz' work was instrumental in showing how economic models can provide a framework for the analysis of systems, such as capitalism and socialism, and how the incentives in such systems affect members of society. The theory of incentive compatibility that Hurwicz developed changed the way many economists thought about outcomes, explaining why centrally planned economies may fail and how incentives for individuals make a difference in decision making.
Hurwicz serves on the editorial board of several journals. He co-edited and contributed to two collections for Cambridge University Press: Studies in Resource Allocation Processes (1978, with Kenneth Arrow), and Social Goals and Social Organization (1987, with David Schmeidler and Hugo Sonnenschein). His recent publications include the papers “Economic Theory” (2003, with Thomas Marschak), “Review of Economic Design” (2001, with Stanley Reiter), and “Advances in Mathematical Economics” (2003, with Marcel K. Richter). Hurwicz has presented the Fisher-Schultz (1963), Richard T. Ely (1972), David Kinley (1989) and Colin Clark (1997) lecture.
Hurwicz was named Regents Professor in the Department of Economics in 1969. He taught graduate school as professor emeritus most recently in the fall of 2006. Hurwicz retired from full time teaching in 1988.
Hurwicz has taught subjects ranging from theory to welfare economics, public economics, mechanisms and institutions, and mathematical economics. His current research, as described by the University of Minnesota, is in “comparison and analysis of systems and techniques of economic organization, welfare economics, game-theoretic implementation of social choice goals, and modeling economic institutions.”
Hurwicz was elected a fellow of the Econometric Society in 1947, and in 1969 was the society's president. Hurwicz was inducted into the American Academy of Arts and Sciences in 1965. In 1974, he was inducted into the National Academy of Sciences and in 1977 was named a Distinguished Fellow of the American Economic Association. Hurwicz received the National Medal of Science in 1990 in Behavorial and Social Science, presented to him by President of the United States George H. W. Bush, “for his pioneering work on the theory of modern decentralized allocation mechanisms.”
He served on the United Nations Economic Commission in 1948 and the U.S. National Research Council in 1954. In 1964 he was a member of the National Science Foundation Commission on Weather Modification. He is a member of the American Academy of Independent Scholars (1979) and a Distinguished Scholar of the California Institute of Technology (1984).
Hurwicz has received six honorary doctorates, from Northwestern University (1980), the University of Chicago (1993), Universitat Autònoma de Barcelona (1989), Keio University (1993), Warsaw School of Economics (1994) and Universität Bielefeld (2004). He is an honorary visiting professor of the Huazhong University of Science and Technology School of Economics (1984).
In October 2007, Hurwicz shared The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel with Eric Maskin of the Institute for Advanced Study and Roger Myerson of the University of Chicago “for having laid the foundations of mechanism design theory.” During a telephone interview, a representative of the Nobel Foundation told Hurwicz and his wife that Hurwicz is the oldest person to win the Nobel Prize. Hurwicz said, “I hope that others who deserve it also got it.” When asked which of all the applications of mechanism design he was most pleased to see he said welfare economics. The winners applied game theory, a field advanced by mathematician John Forbes Nash, to discover the best and most efficient means to reach a desired outcome, taking into account individuals' knowledge and self-interest, which may be hidden or private. Mechanism design has been used to model negotiations and taxation, voting and elections, to design auctions such as those for communications bandwidth, elections and labor talks and for pricing stock options.
The following press release from the Royal Swedish Academy of Sciences describes Hurwicz’s work:
Adam Smith's classical metaphor of the invisible hand refers to how the market, under ideal conditions, ensures an efficient allocation of scarce resources. But in practice conditions are usually not ideal; for example, competition is not completely free, consumers are not perfectly informed and privately desirable production and consumption may generate social costs and benefits. Furthermore, many transactions do not take place in open markets but within firms, in bargaining between individuals or interest groups and under a host of other institutional arrangements. How well do different such institutions, or allocation mechanisms, perform? What is the optimal mechanism to reach a certain goal, such as social welfare or private profit? Is government regulation called for, and if so, how is it best designed?
These questions are difficult, particularly since information about individual preferences and available production technologies is usually dispersed among many actors who may use their private information to further their own interests. Mechanism design theory, initiated by Leonid Hurwicz and further developed by Eric Maskin and Roger Myerson, has greatly enhanced our understanding of the properties of optimal allocation mechanisms in such situations, accounting for individuals' incentives and private information. The theory allows us to distinguish situations in which markets work well from those in which they do not. It has helped economists identify efficient trading mechanisms, regulation schemes and voting procedures. Today, mechanism design theory plays a central role in many areas of economics and parts of political science.
In June 2008, Hurwicz was hospitalized and diagnosed with renal failure. He died a week later in Minneapolis.